A brokerage note from Citi has revised its rating on Gujarat State Petronet to 'Buy' from 'Sell' on March 17 with a target price of Rs 325 per share, reflecting a 19 percent upside from current levels.
Gujarat State Petronet (GSPL) said it has secured regulatory approval from Petroleum and Natural Gas Regulatory Board (PNGRB) to develop the Anjar-Palanpur pipeline, a key infrastructure project aimed at enhancing gas transportation in Gujarat. The project entails a capital investment of Rs 2,100 crore, with completion anticipated within three years.
Citi's double upgrade on GSPL follows this approval, with the brokerage revising its rating from ‘Sell’ to ‘Buy’ on the back of a potentially strong longer term growth trajectory.
Citi has retained its target price at Rs 325 per share, implying a potential upside of 19 percent from current levels. The upgrade follows a sharp 35 percent decline in GSPL’s shares over the past six months, however, the Citi is considering the risk-reward balance to be more favourable now.
Citi note said that the immediate impact on tariffs may be limited, and the long-term potential to be dependent on tariff adjustments and capacity-driven growth, reinforcing its bet on GSPL at current valuations.
The newly-approved pipeline, designed with a capacity of 12 million metric standard cubic meters per day, is expected to further expand GSPL’s high-pressure gas grid in Gujarat to a total capacity of 45 mmscmd. A crucial aspect of the pipeline expansion is the connection between Mundra LNG terminal and GSPL’s Mehsana-Bhatinda pipeline, a link that is vital in regional gas transportation.
At present, the Mundra terminal remains under-utilised due to capacity limitations, and the new project is expected to address the bottlenecks.
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